Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Better Retirement Exit Strategies with Life Insurance
For financial professional use only. Not for use with the public.
Presented by: Joe Chenoweth, CLU, ChFC, AEP
Vice President, Estate & Financial Planning*
16479 Dallas Parkway, Suite 850 Addison, Texas 75001
(469) 737-4000
*Registered representative of , and securities and investment advisory service offered through Hornor, Townsend & Kent, Inc., (HTK) Registered Investment Advisor, Member FINRA/SIPC. HTK does not offer tax or legal advice. Clients should
always consult a qualified advisor regarding their individual circumstances. ARMOR Wealth Management, LLC is independent of HTK
A4TN-1113-05E2
Important Disclosures
The following presentation is for educational purposes only and should not be considered as specific investment or planning advice. Depending on individual circumstances, the strategies discussed in this presentation may not be appropriate for your situation. Please consult a qualified advisor regarding your individual circumstances. Any examples or client case studies are hypothetical, intended for illustrative purposes only. Your results may vary.
For financial professional use only. Not for use with the public.
Agenda
• Mountain Climbing
• Challenges of Current Thinking
• Solutions to Challenge Your thinking
For financial professional use only. Not for use with the public.
According to a May 2012 Financial Planning article, “62% of uninsured individuals responded that no one had ever offered to sell them a Life Insurance policy.”
For financial professional use only. Not for use with the public.
Later in the same article, it was reported that “56% of Financial Advisors are so uncomfortable talking about Life Insurance that they never bring up the subject with their clients. When asked why, their response “no process!”
May 21 & May 22, 2012 articles online at Financial Planning "Feeding America"
What’s Wrong with this Picture?
For financial professional use only. Not for use with the public.
What’s the goal in climbing a mountain?
Mt. Everest
For financial professional use only. Not for use with the public.
Get to the top?
For financial professional use only. Not for use with the public.
OR Get to the top
AND Get back down
safely?
The Danger of Not Understanding the Goal
• Of the 4042 who have reached the summit, 265 have died
• 1 of 10 climbs results in a death
• Over 200 bodies remain on the slopes
• The majority have died on the way down
Mt. Everest
Climbing.about.com. Death on Mount Everest
For financial professional use only. Not for use with the public.
The smart climber packs his gear for the entire trip while still in base camp
For financial professional use only. Not for use with the public.
Gear alone is NOT sufficient
There must also be a strategic plan of attack AND the skills and techniques for negotiating every aspect of the trip
For financial professional use only. Not for use with the public.
How is mountain climbing similar to retirement planning?
For financial professional use only. Not for use with the public.
The Danger of Not Understanding the Retirement Planning Goal
• Distribution discussion comes too late in the process
• Too few sources of income are created in advance
• Distribution strategies often severely limited
• Usually no back-up plan for wealth eroding factors
• Many “die” on the way down
For financial professional use only. Not for use with the public.
Equipment & Tools
Financial Concepts & Products
For financial professional use only. Not for use with the public.
Equipment & Tools
Concepts & Products
Skill & Technique
Process & Strategy
Dictate
For financial professional use only. Not for use with the public.
Retirement Planning Strategies
Must start with the end in mind!
Challenges of
Current Thinking
For financial professional use only. Not for use with the public.
Money is NOT Math!
• Why is reality so different from the myth? – $_X_ per month @ _Y_% X _Z_ years = $uccess
For illustrative purposes only, not indicative of any specific investment strategy.
For financial professional use only. Not for use with the public.
− This is math − Math = science − If planning for financial success was a science, everyone would win the game! − Planning = NOT science − Money doesn’t care about science!
Current thinking • The “safe withdrawal rate” on your assets in
retirement is 3.5 – 4% Really?
• Recent research* says a 4% initial real withdrawal rate has approximately a 50% probability of success over a 30 year period! * “Low Bond Yields and Safe Portfolio Withdrawal Rates” Blanchett, Finke, Pfau January 21, 2013, Morningstar Press
For financial professional use only. Not for use with the public.
Really? • Same research* says a person who wants
a 90% probability of success over a 30 year period with a 40% equity portfolio should only have a 2.8% initial withdrawal rate ($28,000 per million!)
* “Low Bond Yields and Safe Portfolio Withdrawal Rates” Blanchett, Finke, Pfau January 21, 2013, Morningstar Press
For financial professional use only. Not for use with the public.
Suze and Dave Say…
• Term is the Cheapest form of Life Insurance
• Permanent Life is a “Bad Investment”
• You Don’t Need Life Insurance During Retirement
For financial professional use only. Not for use with the public.
Why is the life insurance company willing to place this bet?
$1,000,000 Death Benefit 20-year Term
$2,100 Premium
Male, Age 45 Preferred, NT
86.3% probability of outliving the term
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
868888
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
Solutions to Challenge Your Thinking
For financial professional use only. Not for use with the public.
What do people want?
• More certainty of outcome • Less exposure to risk & taxes • More liquidity, use & control of their $$ • Maximize wealth potential • Eliminate the possibility of failure
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
Game Plan, Coach &
Scoreboard
PS&G Model® is a trademark of LEAP Systems, LLC an independent affiliate owned by Penn Mutual. Trademarks belong to their respective owners
For financial professional use only. Not for use with the public.
Protection First Planning!
Assets
Assets + Income
Assets + Income +
Life
For financial professional use only. Not for use with the public.
Then Savings
Parking Lot
Rules Based
For financial professional use only. Not for use with the public.
Then Growth
Lender
Owner
Hard Assets
For financial professional use only. Not for use with the public.
Create Multiple Sources of Income Social Security Trust Income Life Insurance Dividends Life Insurance Cash Values
Interest or interest & principal pay down Roth income IRA / QP income maximized Annuity income
Dividends, interest, and/or pay down Reverse mortgage Rents Business/tax shelter income
For financial professional use only. Not for use with the public.
Ripple Effect of Permanent Life
Insurance
PS&G Model® is a trademark of LEAP Systems, LLC an independent affiliate owned by Penn Mutual. Trademarks belong to their respective owners
For financial professional use only. Not for use with the public.
Person A vs.
Person B Example
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
Tax rate Increase to 34%
For financial professional use only. Not for use with the public.
Inflation Increase to 3.5%
For financial professional use only. Not for use with the public.
Principal Loss 25%
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
For financial professional use only. Not for use with the public.
Tax rate Increase to 34%
For financial professional use only. Not for use with the public.
Inflation Increases to 3.5%
For financial professional use only. Not for use with the public.
Principal Loss 25%
For financial professional use only. Not for use with the public.
Principal Loss 50%
Volatility Buffer • In the retirement distribution phase …
– IF you are taking a fixed dollar amount or a fixed percentage from you retirement nest egg …
– What happens when the nest egg earns less than the projected ROR?
– OR there is a 2008-type market correction – If you take the same fixed amount or % from a
now reduced nest egg … – Might you be putting the rest of your retirement
success at risk? For financial professional use only. Not for use with the public.
Volatility Buffer
• There is usually more than one way to accomplish a desired result
• But let’s look at just one way to offset the probability of a drop in return or market correction by creating a volatility buffer during retirement
For financial professional use only. Not for use with the public.
Volatility Buffer • How to offset that probability?
– Have another money bucket that is not correlated to any other investment asset
– Draw income from that bucket enabling the nest egg to recoup it’s losses
What kind of asset is that?
For financial professional use only. Not for use with the public.
Other Living Values of the Death Benefit
• Enable non-income producing assets to produce income – Reverse mortgage – Charitable Remainder Trust
• Make income producing assets provide greater income – Spend down rather than “safe withdrawal”
• Reduce income tax during retirement – The spend down strategy reduces principal, which
reduces interest, etc, which reduces tax liability
For financial professional use only. Not for use with the public.
Important Disclosures
The availability of access to benefit guarantees or values is not intended to provide long term care insurance. Life insurance benefit amounts are unrelated to the amount of charges incurred for the cost of care. Life insurance policies contain exclusions, limitations, reduction of benefits and terms for keeping them in force. Accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, and will reduce the death benefit and policy values. Loans are income tax free as long as the policy is not a “modified endowment contract” (MEC) and the policy should not be surrendered, lapsed, or otherwise terminated during the lifetime of the insured. All guarantees are based upon the claims paying ability of the issuer.
For financial professional use only. Not for use with the public.
Living Values of the Death Benefit of Permanent Life insurance
• These are just a few of the Living Values of the Death Benefit of Permanent Life Insurance – there are many more.
• However, not everyone gets to participate at the same level – To buy life insurance you must qualify with your health,
your occupation, your habits and your hobbies. – Some people are rated higher than others because of
those factors and some can’t qualify at all
For financial professional use only. Not for use with the public.
Result for the Client • More and better benefits
• Less exposure to risk & taxes
• More use & control of their money
• More retirement income on less capital
For financial professional use only. Not for use with the public.
Important Disclosures
The views and opinions expressed are the registered representative’s own and not necessarily those of HTK and there is no implied endorsement by the registered rep and HTK of any financial advice.
For financial professional use only. Not for use with the public.